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Nov. 17, 2009
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JWisdom.com: If Frank Sinatra married Edith Piaf with Rabbi Y.Y. Rubinstein (2 minutes) Life lessons from what would be regarded as the most inappropriate lyrics ever sung
Nov. 16, 2009
The Jewish Ethicist by Rabbi Dr. Asher Meir : When borrowing is stealing
JWisdom.com: Deconstructing faith with Rabbi Warren Goldstein (9 minutes)
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Nov. 12, 2009
The Kosher Gourmet By Marialisa Calta : A sweet sweet potato treat
JWisdom.com Does God get tired? with Rabbi Harvey Belovski ( 5 minutes)
Nov. 11, 2009
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Michael Doyle: Author of book exposing CAIR ordered to remove supporting documents from Web
JWisdom.com If the creation so loudly shouts the existence of the Creator, why aren't more people believers? with Rabbi Naftali Brawer (9 minutes)
Nov. 9, 2009
Mark Steyn: Shooter exposes hole in U.S. terror strategy
JWisdom.com It's never too late to have a happy childhood with Sarah Chana Radcliffe (5 minutes)
Nov. 6, 2009
Rabbi Berel Wein: Choosing to hear
JWisdom.com Zero to 1/60th: How to Empower An Hour with Gavriel Aryeh Sande (7 minutes)
Caroline B. Glick The mullahs' big week
Suzanne Fields A Fallen Wall for Fallen Man
Nov. 5, 2009
The Kosher Gourmet: Three scrumptious -- but simple -- butternut squash dishes
JWisdom.com Hidden Hints: Unlocking Faith & Prayer with Rabbi Jay Yaacov Schwartz (10 minutes)
Nov. 4, 2009
Tom Hamburger and Kim Geiger: Should prayers be covered?
JWisdom.com When God played peacemaker With Rabbi Sroy Levitansky (5 minutes)
Nov. 3, 2009
Martin Peretz: Beware, Barack. Beware, Rahm. Beware, Axelrod
JWisdom.com Are you are closet idolater? With Sara Yoheved Rigler (10 minutes)
Nov. 2, 2009
Paul Greenberg: The Holocaust is now on Facebook
JWisdom.com Abraham's Strange Change With Rabbi Yitzchok Fingerer (5 minutes)
Oct. 29, 2003
Mortimer B. Zuckerman: Graffiti On History's Walls (MUST-READ!)

Jewish World Review May 12, 2006 / 14 Iyar, 5766

How the boom began

By Rich Lowry


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http://www.JewishWorldReview.com | If you find a turtle on top of a fence post, Bill Clinton used to say, it means someone put it there. It was his folksy way to explain why anything good that happened was no accident, and he should get credit.


George Bush has a fat turtle on top of a fence post in the form of our extraordinarily robust investment-driven economic boom. Not only has he been unable to convince people he put it there, he hasn't even been able to convince them that the turtle is on the post at all. Attitudes about the economy remain downbeat, even as all the statistical indices point in the right direction.


Perhaps the biggest reason they started pointing that way so determinedly was Bush's tax cuts of 2003, which cut taxes on capital gains and dividends and expanded expensing for business investment. It is the most obviously effective economic initiative in years. That Bush hasn't managed to take credit for it is an extraordinary communications failing. It would be a little like FDR not selling the New Deal, or Bill Clinton not persuasively touting his (much overhyped) 1993 tax hike and deficit-reduction package.


The downturn Bush inherited early in his term was driven by an investment bust. Consumer spending wasn't the problem. Unlike in prior recessions, consumer spending didn't decline at all, according to a report of the Joint Economic Committee of Congress. In contrast, investment collapsed. The way to revive it was suggested by a simple principle — the more you tax something, the less you get of it, and vice versa. Reducing taxes on capital and investment therefore should increase both, and so it has.


Consider the big picture: The tax cuts were passed in May 2003, and that's roughly when investment — and everything else — began to take off. According to the Joint Economic Committee, all inflation-adjusted fixed business investment dropped at a nearly 6 percent annual rate from the third quarter of 2000 to the first quarter of 2003, then jumped by 9.2 percent from the second quarter of 2003 to the first quarter of 2006. Investment in equipment and software followed the same trend during the same time period. Meanwhile, the stock market began growing at a faster pace, because taxes were less of a drag on its value.


Economics writer Donald Luskin notes that GDP growth, employment, corporate earnings, new manufacturers' orders and tax receipts all began booming after the spring of 2003. As he puts it, "Tell people they will get to keep more of the fruits of their labors and the fruits of their investments, and they will labor more and invest more."


Academic studies are adding specific evidence of the effectiveness of the 2003 tax changes. Part of what the 2003 cuts did was accelerate tax cuts that had been scheduled to phase in more slowly. University of Michigan Economists Christopher House and Matthew Shapiro conclude that "about half of the rebound in GDP in mid-2003 can be attributed to the elimination of the phase-in of the tax cuts."


In a study in the May issue of the American Economic Review, Alan Auerbach and Kevin Hassett find that the 2003 tax cuts increased particularly the market value of small and entrepreneurial firms.


There has been an increase in dividends — again confirming that taxing something less creates more of it. Raj Chetty and Emmanuel Saez write in the Quarterly Journal of Economics: "An unusually large number of firms initiated or increased regular dividend payments in the year after the reform. As a result, the number of firms paying dividends began to increase in 2003 after a continuous decline for more than two decades."


One reason Bush hasn't been able to sell his 2003 tax cuts properly is that, until recently, the Republican Congress had failed to extend them. Now, the GOP is finally pushing their expiration date into the future, from 2008 to 2010. This is the occasion for celebration, and lots of explaining as to how the turtle got on that fence post.

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© 2006 King Features Syndicate

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